Lakshmi Mittal, CEO of Luxembourg-headquartered steel giant ArcelorMittal, has seen his dream of acquiring a steel plant in his homeland hit yet another legal hurdle.
Last Friday, ArcelorMittal got the nod from the Ahmedabad bench of the National Company Law Tribunal (NCLT) to acquire Essar Steel, which was put on the block after its lenders approached the court to recover about $7 billion in debts owed. ArcelorMittal offered 420 billion rupees (US$6.03 billion) to take it over.
However, now the erstwhile promoters of Essar Steel have launched an appeal at the National Company Law Appellate Tribunal against a lower bankruptcy court order that led to the ArcelorMittal takeover bid. The matter was brought before a two-member bench, which delayed its hearing until after the NCLT posts its full written order.
In a related development Standard Chartered Bank, the third largest secured creditor of Essar Steel, also approached the appellate tribunal to contest the order. The bank contends that, according to the resolution plan, its dues will be drastically reduced to 600 million rupees ($8.62 million) from 34.87 billion rupees ($500 million).
For ArcelorMittal it has been a long, drawn-out battle to break into the Indian steel market. Mittal had to shell out an extra $1 billion to clear the debts of two firms, Uttam Galva and KSS Petron, in which he held stakes. In order to be eligible to bid for Essar Steel, in October last year ArcelorMittal also sold its stakes in the two debt-laden companies, which were declared non-performing assets.
The capacity of Essar Steel will make ArcelorMittal the fourth-biggest player in the country. ArcelorMittal is partnering Nippon Steel & Sumitomo Metal for the purchase, though it will hold a controlling stake.